How to Keep Your Home and Avoid Bankruptcy Pitfalls

Sen. Charles Schumer (D., N.Y.) has reportedly has asked the Federal Trade Commission to investigate Countrywide Financial(CFC Quote), the nation's largest mortgage lender and a leading servicer, for alleged mistreatment of homeowners in bankruptcy. But Porter says, "I don't think Countrywide is worse than anyone else in the industry."

(Steve Bailey, who heads loan administration at Countrywide, told the same Senate panel that his company is taking steps to improve its servicing of loans to borrowers who are in bankruptcy. He also said an internal review of Countrywide's servicing of bankrupt borrowers' loans found "errors adversely impacting borrowers are at a rate of less than 1%.")

So what can you do to hang on to your home if you get behind on your payments?

Get It In Writing

Whether you're in bankruptcy or not, never take it for granted that a mortgage company is properly crediting your payments, particularly if you're making a late payment -- or for that matter, any kind of unusual payment, such as paying down the principal. "Across the board, this is a high volume, low-staffed industry, and it's not designed to deal with unusual circumstances," Porter says in an interview.

She notes consumers have the right under Real Estate Settlement Procedures Act to make what is called a 'qualified written request.' This is a written letter -- not email -- sent to the mortgage servicer that says 'I think there could be a mistake and I want more information,' and requesting a payment history or payoff statement. The servicer has 20 days to acknowledge that it got the letter and 60 days to provide the information.